Coinbase has publicly filed paperwork to list its stock on the NASDAQ exchange, a huge step forward in the first major public offering for a cryptocurrency company. Coinbase’s S-1 was published on Thursday morning, after being confidentially submitted to the SEC in December.
In an attached letter to investors, founder Brian Armstrong presented cryptocurrency as an equalizing force in financial markets — and Coinbase as the company at the forefront of that change.
“If the world economy ran on a common set of standards... the world would be a more fair and free place”
“The current financial system is rife with high fees, unequal access, and barriers to innovation,” the letter reads. “If the world economy ran on a common set of standards that could not be manipulated by any company or country, the world would be a more fair and free place, and human progress would accelerate.”
The filing lays out the company’s finances in unprecedented detail, including a surprisingly profitable 2020 driven by a huge spike in the price of bitcoin. Coinbase brought in $1.2 billion in revenue over the course of the year for a profit of $322 million, the first time the company has turned an annual profit.
Coinbase boasted 43 million verified users as of the end of 2020, with 2.8 million users making transactions each month and a total of $90 billion of assets held in trust. All told, the company has handled transactions worth $456 billion over its life span as a company.
Still, the skyrocketing price of bitcoin also has its drawbacks. The filing acknowledges that the volatility of cryptocurrency prices will be a significant risk for Coinbase going forward.
“All of our sources of revenue are dependent on crypto assets and the broader cryptoeconomy,” the filing reads. “There is no assurance that any supported crypto asset will maintain its value or that there will be meaningful levels of trading activities. In the event that the price of crypto assets or the demand for trading crypto assets decline, our business, operating results, and financial condition would be adversely affected.”
Much of Coinbase’s success has been due to its ongoing focus on complying with financial regulations concerning cryptocurrency. Coinbase was one of the first exchanges to embrace conventional know-your-customer finance rules, despite reluctance from the libertarian corners of the cryptocurrency world. As those regulations continue to tighten, many of Coinbase’s competitors have been prosecuted for money laundering, and the company continues to invest heavily in legal compliance. Kathryn Haun, a former prosecutor who led the Silk Road task force corruption case, now sits on Coinbase’s board of directors.
In a nod to the historic nature of the filing, elusive Bitcoin founder Satoshi Nakamoto is listed on the S-1 as an interested party alongside lawyers and investors involved in the deal. As a result, a copy of the filing has been sent to Nakamoto’s bitcoin wallet. The filing also lists the identification of Nakamoto as a potential risk, saying the value of Bitcoin and thus Coinbase might be damaged by “the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed Bitcoin, or the transfer of Satoshi’s Bitcoins.”
Update 12:01 PM ET: Added sentence about Nakamoto’s identification as a risk factor for Coinbase.